Blue lit ball on steps.

2020 is the Year for Tax Departments to Upskill

By Naren Patel, Brad Pinne, Robert T. Wentland

July 20, 2020

A 2020 survey of tax department leaders suggests that the tide is shifting on how to address the challenges within corporate tax departments. For many years, added headcount and technology spend was the panacea. We encourage tax leaders to view “upskilling,” as a viable alternative to lower costs, increase productivity, reduce attrition, and maximize engagement. Upskilling is the proactive training of employees on technology and/or processes that are critical to the success of the department’s mission. We recommend that upskilling efforts should include a focus on improving complex data analysis skills. While the momentum toward upskilling began well before COVID-19, leaders should take this opportunity to upskill, restructure, and set the path for a long-term and sustainable tax department.

The Upskilling Momentum

Since 2015, Accenture has invested over $1 billion in upskilling and reskilling.[1] Amazon recently pledged to spend $700 million to upskill and reskill a third of its U.S. workforce over six years.[2] A recent McKinsey Global Survey shows that eighty-seven percent of respondents say they either are experiencing skills gaps or expect them within a few years, and cite skill building as the most effective way to close skill gaps.[3]

The upskilling initiative is here, it’s popular and it can transform corporate tax departments. Some tax department leaders agree. The following chart compares tax department leadership survey responses from 2016, 2018, and 2020:

The following chart compares tax department leadership survey responses from 2016, 2018, and 2020

A culture of upskilling involves both a push by employers that encourages the acquisition of new skills, and a pull by employees that have the innovative desire for continuous learning and high engagement.

“Our experience has shown that the current pace of disruption, exacerbated by the COVID-19 pandemic, has triggered a race between education and technology. As intelligent systems and machines reshape the nature of work, people will need entirely new skillsets through upskilling. This will require sophisticated approaches to experiential learning techniques, delivered through agile methods to optimize workforce proficiency. Specifically, our analysis has shown that upskilling needs are focused in the areas of creativity, socio-emotional intelligence and complex reasoning in addition to the role-specific Tax learning required from a technical standpoint.”

Eric Biegansky, Managing Director, Talent & Organization at Accenture

Tax professionals typically have tremendous tax regulation, compliance, and planning expertise. However, tax directors note significant skills gaps regarding the ability to identify, acquire, and analyze large accounting and statistical data sets (e.g., trial balance, general ledger, headcount, revenue by customer, etc.). This appears to be a common theme among many organizations. The McKinsey Global Survey also shows that respondents believe that the greatest skills gap in their organization was data analytics.[7]

Tax departments have increasingly become dependent upon other resources (e.g., IT, accounting, finance) to fill the data analytics skills gap.

While outsourcing can lower direct costs, it can pose a risk to quality and timeliness and sacrifices opportunities to build institutional knowledge within the tax department. For example, COVID-19 has put a strain on the availability of IT resources as IT headcount is reduced due to economic pressures or redeployed to support the unprecedented business continuity programs.[9] This can have a direct impact on the productivity of tax departments that outsource data collection and analytics functions to other departments.

2020 as the Year of Upskilling for Tax Departments

Three realities might serve as the catalyst for making 2020 the year of upskilling:

1. The Pace of Change

The pace of tax legislation and regulatory changes has increased and the demand for data-intensive analysis is at an all-time high. Many technology solutions are designed to solve a discrete problem that becomes obsolete with regulatory change. Other longer-term technology solutions can struggle to deliver value with frequent tax restructurings and company acquisitions.

Upskilling tax department personnel to acquire complex data skills beyond spreadsheets or the use of pre-defined analytical applications is essential to long-term success. For example, one option is to identify some portion of the tax department, including leadership, to be trained on relational database tools, such as SQL (Structured Query Language). SQL is a common relational database programming language used to efficiently analyze voluminous accounting, finance, and statistical data. With the proper support, learning SQL and other relational database tools is attainable and lessens the dependencies on others to identify, acquire and validate data that is critical for tax planning, compliance, audit response, and controversy.

2. Post COVID-19 Cost Pressures

Cost pressures may challenge tax departments to operate in a more lean and agile manner in two ways.

  • Corporate tax departments may be forced to reduce their controllable spend (e.g., headcount, outside consultants, etc.).
  • Tax departments with high dependencies upon other departments may be indirectly impacted. Departments that traditionally provide data to tax departments (e.g., IT, accounting, finance) are likely to have fewer resources to serve the tax department.

Upskilling tax department personnel to become more data savvy allows tax staff to independently identify, validate, and evaluate the applicability of key data. One corporate department that does a good job of upskilling is the Financial Planning & Analysis (FP&A) department. FP&A often hires accounting and finance undergraduates and trains their staff on complex data acquisition and analysis tools. They are highly autonomous, knowledgeable about the location of key accounting data (e.g., ERP systems or data warehouses), and are encouraged to innovate as they adapt to rapidly changing analysis demands.

3. Agile and Adaptable Professionals are Available

The post-COVID-19 employment outlook suggests that attrition is likely to dip, and the pool of qualified candidates will be better than in recent years.

“Pre-COVID, the jobless rates for accounting/tax professionals was about 1.4%, which was notably lower than the national average unemployment rate,” says Kathy Spearing, the President of Brilliant, an accounting and staffing solutions company. “Today, the unemployment rate is hovering around 14% – there is a large pool of highly qualified accounting/finance/tax professionals who are actively engaged in looking for a new job,” adds Spearing. “The opportunity exists for companies to hire great talent right now.”

One organization accrediting U.S. undergraduate accounting programs, The Association to Advance Collegiate Schools of Business (AACSB), is encouraging schools to promote an environment of agility. Agile graduates are encouraged to build upon their existing curriculum and embrace opportunities to learn new technologies as their careers progress.

“A business school with AACSB’s supplemental accounting accreditation is expected to demonstrate a commitment to fostering technology agility among graduates and faculty,” says Maria Baltar, the Assistant Vice President, at AACSB, International. “Business schools have a responsibility that goes beyond knowledge transfer. Inculcating agility in students is critical since technology changes constantly.”

Sandra Vera-Muñoz, the Accountancy Department Chair at the University of Notre Dame’s Mendoza College of Business, embraces a philosophy of adaptability. “We expect our accounting graduates to be adaptable as they enter the workforce,” says Vera-Muñoz. “Our faculty reinforce the reality that the demand for technology skills students learn while at Notre Dame will change. Our students leave Notre Dame knowing that continuous learning and adaptability to new technology is essential for their long-term professional success.” The University of Notre Dame’s Accountancy department also appreciates the growing importance of data analytics skills for accounting graduates. “Beginning in the fall of 2020, the University of Notre Dame will offer a Data Analytics in Accountancy concentration in our Master of Accountancy program, and it will be available to our two tracks, Assurance & Advisory Services and Tax Services,” adds Vera-Muñoz.

We encourage tax department leaders to adjust their lens when looking for new talent or evaluating the likely success of existing resources. Is deep state and local tax experience of high importance or is a proven track record of adapting to changing technology and embracing new responsibilities more indicative of likely success? Is a master’s degree in Taxation (and the premium cost that comes with it) more valuable than someone with an undergraduate degree in accounting that is adaptable and agile to learn new data technology? As tax leaders refine their focus, it is also critical to clearly communicate these expectations to internal and external recruiters.

“The most important part of the hiring process is the initial step of writing the job description,” says Spearing of Brilliant. “Knowing how to hire great employees begins with a well-written job description. Consider your job description as the advertisement for your company and your position. If you advertise the job correctly, you will attract the ideal candidates. This becomes particularly relevant if you are looking to upskill or broaden the skill set as compared to your traditional hiring profile.”

The pace of change in tax legislation suggests that deep expertise in past tax practices is important but agility, adaptability, the willingness to innovate and complex data skills have significant value going forward.

Conclusion

The popularity of upskilling is at an all-time high and tax department leaders should consider upskilling as a viable solution to address their critical needs, lower cost, increase employee engagement, improve quality, and maximize retention. Rest assured that upskilling is not easy. While eighty-seven percent of organizations say they are experiencing skills gaps or expect them within a few years, far fewer indicate that their organizations are ready to respond.[10] The recent economic downturn coupled with a favorable employer recruiting environment suggests that 2020 is the year to consider upskilling. We believe that priority should be given to the development of complex data skills.

If the idea of upskilling is appealing, consider doing the following soon:

  • Step 1 – Validate hypothesis: Gather facts to substantiate that insufficient data skills and/or data dependencies are negatively impacting the tax department. Select one team within your tax department that repeatedly struggles to effectively execute their tasks and has a high dependency on others. Confirm that the problem is data-related.
  • Step 2 – Inventory tax department skills: Step back and inventory the tax department’s skills. Are your resources sufficiently agile to handle the department’s evolving needs? Consider the following:
    • Is the individual highly dependent upon others?
    • Is the individual likely to respond to upskilling?
    • When filling vacancies, consider agile and adaptable candidates rather than candidates with identical experience to those that previously filled the now-vacant position.
  • Step 3 – Provide support: Establish a Director of Tax Data that can perform sophisticated data analyses and understands tax. If you upskill a portion of the tax department, the newly upskilled, data-savvy resources need a data leader/mentor/sponsor to manage their career within the tax department.
  • Step 4 – Assess the future: As you contemplate upskilling or restructuring, consider whether your solution-based technology investments will withstand the rapid pace of tax law changes. If not, consider increasing the investment in upskilling while moderating technology spend.

[1] Accenture, “Reskilling and Workforce Training News,” Talent & Organization Blog for Financial Services. https://talentorganizationblog.accenture.com/financialservices/reskilling-and-workforce-training-news
[2] About Amazon Staff, “Upskilling 2025,” US About Amazon (Amazon, July 31, 2019), https://www.aboutamazon.com/working-at-amazon/upskilling-2025/upskilling-2025.
[3] McKinsey & Company, “Beyond hiring: How companies are reskilling to address talent gaps,” February 12,2020, https://www.mckinsey.com/business-functions/organization/our-insights/beyond-hiring-how-companies-are-reskilling-to-address-talent-gaps
[4] KPMG, A look inside tax departments worldwide and how they are evolving, Global Tax Benchmarking Survey, 2016. https://assets.kpmg/content/dam/kpmg/xx/pdf/2016/11/global-tax-benchmarking-survey.pdf
[5] KPMG, A look inside tax departments worldwide and how they are evolving, Global Tax Department Benchmarking, 2018. https://assets.kpmg/content/dam/kpmg/dk/pdf/DK-2018/03/tax-benchmarking-report.pdf
[6] BDO, “BDO Tax Outlook Survey,” February 2020, https://www.bdo.com/insights/tax/federal-tax/bdo-tax-outlook-survey.
[7] McKinsey & Company, “Beyond hiring: How companies are reskilling to address talent gaps,” February 12,2020, https://www.mckinsey.com/business-functions/organization/our-insights/beyond-hiring-how-companies-are-reskilling-to-address-talent-gaps
[8] Deloitte, The management of tax: Discovering value, delivering confidence, Global research bulletin, 2019, https://www2.deloitte.com/content/dam/Deloitte/us/Documents/Tax/us-deloitte-global-research-management-of-tax2019.pdf
[9] Letter to Paolo Gentiloni. “Request to European Commission to Recommend/Endorse the Deferral of EU DAC6 Reporting Obligations,” April 20, 2020, https://www.law360.com/articles/1265736/attachments/0.
[10] McKinsey & Company, “Beyond hiring: How companies are reskilling to address talent gaps,” February 12,2020, https://www.mckinsey.com/business-functions/organization/our-insights/beyond-hiring-how-companies-are-reskilling-to-address-talent-gaps